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Australian wealth management body sets out ESG risk/proxy voting requirement for super funds

New move from Financial Services Council

The Australian wealth management industry body the Financial Services Council (FSC) is putting in place a requirement for its superannuation fund members to develop an environmental, social and governance (ESG) risk management policy amid a range of governance tweaks – seeking to ensure that the funds have similar governance structures to the companies in which they invest.
Having been first drafted in 2012 and introduced on a voluntary basis last year, the new regime comes into operation as of July 1 this year. Fund must also disclose how they vote at company annual general meetings. And a board diversity policy will also be needed encompassing “measurable objectives” on gender diversity.
The rules are enshrined in the FSC’s ‘Standard No. 20’ on Superannuation Governance Policy. The aim of the standard is to “promote strong governance arrangements by trustees of superannuation entities”.Under the standard, boards must consist of a majority of independent directors and also have an independent chair. Competing directorships are also to be prohibited.
The FSC’s membership comprises companies in funds management, superannuation, life insurance, financial advice businesses and trustee services, as well as service suppliers like law and accountancy firms, research houses and consultants.
The FSC, where responsible investment training group the RI Academy is a training partner, last year amended its standard (no. 13) on voting policy and disclosure – with the key change being a transition away from aggregated to company level reporting of proxy voting records.

The revisions required voting disclosure on a company-by-company basis on each resolution voted Australian listed companies – such as remuneration reports and director elections. Link